Insolvency Service punishes 32 bankrupt individuals for gambling

The Insolvency Service punished 32 individuals who went bankrupt as a result of excessive gambling or unnecessarily extravagant spending last year*, says leading professional services firm Mazars.

The Insolvency Service secured Bankruptcy Restrictions Orders (BROs) against these 32 individuals to prevent them resuming the gambling, rash speculation or extravagant spending that contributed to their bankruptcy.

Mazars says that a court can issue a Bankruptcy Restrictions Order at the request of the Insolvency Service if they believe an individual was responsible for their own bankruptcy. BROs can have a dramatic impact on individuals, limiting their access to credit and preventing an individual becoming a company director for up to 15 years.

Paul Rouse, Partner at Mazars, says: “These restrictions are serious weapons in the Insolvency Service’s armoury. They are only used when an individual has ended up in bankruptcy because of their own reckless behaviour.”

“People drawn into risky trading or gambling must be aware of the risks these orders pose – it is not just as simple as declaring bankruptcy and walking away from debts they have accumulated. Any individual that breaks these restrictions commits a criminal offence, risking fines or even a custodial sentence in the most serious cases.”

“With the rise of cryptocurrency trading and ‘meme stocks’ over the past year, the number of people becoming bankrupt due to speculation is likely to increase. This kind of risky behaviour will catch the eye of the Insolvency Service when investigating bankruptcies.”

Number of penalties likely to rise as CBILS scams come to light

The number of individuals given Bankruptcy Restrictions Orders for knowingly taking on debts they cannot repay is likely to grow rapidly in 2022, says Mazars.

The Insolvency Service has begun to uncover a large number of fraudulently-obtained loans from Covid loan schemes such as CBILS and BBLS, which will likely see a rise on the 108 BROs issued to individuals for this reason in the past year. This is the most common cause for a BRO, amounting to a third of all cases.

Cases have already been encountered of individuals using fake companies to borrow hundreds of thousands of pounds through the schemes. The loss to the taxpayer on Covid loan fraud is expected to reach almost £5bn, according to the Government.

Paul Rouse says, “We’ve barely begun to scratch the surface of losses on CBILS and BBLS. Over the coming years, those that do get caught for Covid loan fraud are likely to face significant penalties, including BROs.”

Number of Bankruptcy Restrictions Orders in 2020/21 by allegation type

*Year end March 31 2021